The opinion of the court was delivered by: WOLIN
This opinion supplements and formalizes an oral opinion interpreting the civil enforcement provisions of the Employee Retirement Income Security Act of 1974 ("ERISA") and supporting payment of an employee's defined benefit upon retirement despite his misconduct to the detriment of his employer.
Plaintiff began his employment with Target Rock Corporation, a New York Corporation, in 1951. In 1967, Target Rock became a wholly-owned subsidiary of Curtis-Wright, a Delaware Corporation, and plaintiff became a participant in various Curtis-Wright pension and savings plans. During the course of his employment with Target Rock and Curtis-Wright, plaintiff served as president and general manager of Target Rock and as vice president of Curtis-Wright. Moreover, during his employment, plaintiff acquired 4,000 unrestricted shares of Curtis-Wright common stock, and under a Curtis-Wright Restricted Stock Plan, plaintiff purchased 4,200 restricted shares of Curtis-Wright common stock.
The restricted and unrestricted shares of stock, though in issue, do not implicate ERISA and are not considered in this opinion.
In March, 1987, plaintiff was terminated from his employment with Curtis-Wright for cause, following the discovery by Curtis-Wright of substantial and extensive financial irregularities at Target Rock. As Target Rock and Curtis-Wright served as government contractors, these irregularities were immediately reported to the appropriate government agencies to avoid any difficulty with government procurement programs. Since then, several government agencies have been involved in investigations concerning Target Rock and its employees.
The benefits at issue here are governed by the Employee Retirement Income Security Act of 1974, codified at 29 U.S.C. § 1001 et seq. ERISA is a statutory scheme enacted to protect employees enrolled in private pension and benefit plans. E.g., Northeast Department ILGWU Health and Welfare Fund v. Teamsters Local Union No. 229 Welfare Fund, 764 F.2d 147, 162 (3rd Cir. 1985). As observed by the Supreme Court in Nachman Corporation v. Pension Benefit Guaranty Corp., 446 U.S. 359, 375, 64 L. Ed. 2d 354, 100 S. Ct. 1723 (1980), ERISA is intended to assure that "if a worker has been promised a defined benefit upon retirement, and if he has fulfilled whatever conditions are required to obtain a vested benefit - he actually receives it." The underlying policy is to protect the "interests of participants in private pension plans . . by requiring [the plan] to vest the accrued benefits of the employees with significant periods of service, to meet minimum standards of funding, and by requiring plan termination insurance." 29 U.S.C. § 1001(c).
Prior to the enactment of ERISA, pension plans frequently provided for the divesture of employee benefits where the employee engaged in conduct detrimental to the employer. See, J. Mamorsky, Employee Benefits Law: ERISA and beyond § 5.03   at 5-21 (1987). Congress, however, in formulating ERISA, did not explicitly address the effect of an employee's misconduct on his right to receive benefits under ERISA. Yet, several federal courts, citing the nonforfeiture and antialienation provisions of ERISA, as well as the legislative history of such, have dealt with the issue and refused to permit an employer to assert employee misconduct as a defense to payment of pension plans. See, United Metal Products Corp. v. National Bank, 811 F.2d 297 (6th Cir. 1987); Ellis National Bank v. Irving Trust Co., 786 F.2d 466 (2nd Cir. 1986); Winer v. Edison Brothers Stores Pension Plan, 593 F.2d 307 (8th Cir. 1979); Fremont v. McGraw-Edison Co., 606 F.2d 752 (7th Cir. 1979) cert. denied, 445 U.S. 951, 63 L. Ed. 2d 786, 100 S. Ct. 1599 (1980);. Vink v. SHV North America Holding Corp., 549 F. Supp. 268 (S. D.N.Y. 1982). Having examined the legislative history behind ERISA, these Courts have discerned a strong policy opposing forfeiture and alienation of pension benefits and rejecting exceptions based upon employee misconduct. See, Vink at 270; Winer at 310.
Specifically, in Vink v. SHV North America Holding Corp., supra., an employee, serving as the President of a subsidiary corporation, pleaded guilty to mail fraud and bank fraud of that corporation. Thereafter, the parent corporation terminated his employment and denied him his pension benefits.
On the employee's application for summary judgment the Federal District Court for the Southern District of New York granted him his pension benefits in accord with ERISA.
The Vink Court reasoned that although an employee's rights to pension benefits are nonforfeitable under ERISA, a limited number of statutory exceptions do exist. However, none of these exceptions apply to employee misconduct and the Court held that the nonforfeiture and antialienation provisions of ERISA precluded the parent corporation from withholding the employee's benefits. Id. at 270.
Additionally, the Court noted that an implied exception would be difficult to define and would lead to limitless litigation:
"Carving out an exception in this case would start a boundless stream of suits and disputes in which companies refuse to pay pension benefits to allegedly disloyal employees. Courts would then have to determine whether a fraud exception should apply only to felonies, or whether a fraud exception should apply to misdemeanors and acts of negligence as well." Id. at 273.
Relying on such reasoning, the Second Circuit in Ellis National Bank v. Irving Trust Co., supra., affirmed a district court's grant of summary judgment to a judgment creditor of an employee who had been convicted of theft and securities fraud in connection with unauthorized transactions in customer accounts, but who had been a participant in his employers retirement and savings plans and had vested pension rights. While the employer, as defendants here, sought to impose a constructive trust under state common law on the funds in those accounts, the Court declined to adopt that view holding that an implied ...